Resource Commodities

Cobalt is without a doubt one of the main stories of 2017. Over the past 12 months, investor interest has soared on expectations of surging demand from the electric vehicle (EV) sector.

But what will happen to cobalt next year? To find out, the Investing News Network reached out to a number of companies in the cobalt sector to get their thoughts on what’s ahead for the critical metal in 2018.

Anthony Milewski, CEO of Cobalt 27 Capital (TSXV:KBLT); Trent Mell, CEO and president of First Cobalt (TSXV:FCC); Andreas Rompel, president and CEO of Cobalt Power Group (TSXV:CPO); Frank Basa, president and CEO of Castle Silver Resources (TSXV:CSR); Robin Goad, president and CEO of Fortune Minerals (TSX:FT); and Mitchell Smith, president and CEO of Global Energy Metals (TSXV:GEMC), were all able to provide insight. Read on to learn their thoughts.

Cobalt trends 2017: Cobalt surges as EV revolution unfolds

Cobalt made news headlines throughout 2017, with prices jumping and investor optimism increasing throughout the year.

At the beginning of 2017, Cobalt 27’s Milewski expected the EV revolution to come to the forefront of people’s minds and to impact the markets associated with the various battery metals.

“I was completely surprised by how quickly this all came to pass. It exceeded my expectations in terms of levels of interest, levels of noise and the rate at which people began to buy EVs,” he said, adding that 2017 really was the year of the EV.

Similarly, Global Energy’s Smith said his expectations were surpassed this year. “[I am] excited that battery metals and especially cobalt were front and center,” he said.

First Cobalt’s Mell explained that in the past 12 months the cobalt market has continued to grow, with new projections for EV penetration rates reaching as high as 30 percent by 2030.

“Many vehicle manufacturers such as GM (NYSE:GM), Mercedes-Benz, Volvo (STO:VOLV-B), Volkswagen (ETR:VOW3) and others have made new commitments to developing and manufacturing EVs, driving further demand for access to the cobalt market,” he added.

Fortune Minerals’ Goad expected the market to transition into a deficit in 2017, with prices climbing to $20 per pound. “What some thought was an optimistic view ended up being quite conservative as vehicle electrification seems to have passed the tipping point,” he said. In fact, he added, the most challenging part of 2017 has been “the ability to stay on top of how quickly the market is evolving.”

Meanwhile, Global Energy’s Smith said that given the cobalt price surge, there was a lot of confusion due to assets that “will likely never be part of the much-required supply chain.” Similarly, Cobalt Power Group’s Rompel suggested investors should educate themselves before having unrealistic expectations.

Cobalt 27’s Milewski suggested that investors do their work to get into position now. “When the automakers begin to start contracting longer term, when that noise starts, I think it’s going to have a significant impact on the cobalt market. When that happens, you want to already be long on cobalt because I think you’re going to make the most money that way,” he explained.

For First Cobalt’s Mell, the cobalt market is an EV story. “If you are a believer [in] EVs, then the supply gap becomes apparent for cobalt in the near future,” he said.

Cobalt forecast 2018: Supply worries to push prices higher

Looking ahead to next year, the CEOs agreed that as the EV demand continues to surge, supply concerns will drive the market. Carmakers will look to partner up with upstream companies to secure supply, production from the unstable Democratic Republic of Congo (DRC) will remain a concern and investors will learn more about cobalt as the market evolves.

“The outlook for cobalt is excellent. The market is already in a deficit position and upward pressure on the cobalt price can be expected to continue through 2018,” Castle Silver’s Basa said.

Cobalt 27’s Milewski is also very optimistic, as he expects to see a transformation in the cobalt industry next year. That’s because he sees big manufacturers entering into long-term contracts for cobalt supply. “[When] that happens it’s going to structurally change the market in a positive way, and I would be remiss if I didn’t think that was going to positively impact the price too,” he said.

For First Cobalt’s Mell, as carmakers continue to commit to new EV models, surging demand for cobalt will continue to drive the market. “We do not see any near- or mid-term catalysts that will undermine the very strong appetite for new cobalt discoveries, and we expect that this will drive new cobalt discoveries outside the DRC, particularly in North America,” he added.

Similarly, Fortune Minerals’ Goad anticipates that cobalt will remain well bid at current levels, with the risk to prices continuing to be on the upside. “As demand continues to accelerate from the most significant demand pull in history, higher prices will be needed to stimulate new production that is independent of the Congo and China, and the preponderance of production as a by-product of copper and nickel mining, where primary metal markets dictate the production criteria,” he added.

Next year, Global Energy’s Smith expects investors to become much more educated on cobalt. “Companies involved in the space will need to not only have real projects that have future supply capability, but also have a team that has knowledge in the market,” he said, explaining that companies with these characteristics will be able align themselves with downstream partners.

Cobalt forecast 2018: What’s ahead for companies

As the year comes to a close, the execs had a slew of milestones to highlight from 2017 and many more catalysts to look forward in the year ahead.

For Cobalt 27, this year’s major milestone was the company’s IPO in June, which was one of the largest public transactions in the mining sector in Canada since 2012. In 2018, Milewski said the key catalyst to look for from his company is growth.

“We are looking at growth opportunities, at large streaming transactions, and I anticipate that at some point in the future, when we are able to execute on that strategy, it could be transformative for the company and for our shareholders,” he added.

For its part, Fortune Minerals reached several milestones towards the development of its NICO asset in the Northwest Territories. Next year, the company will continue to work on securing financing for construction in order to become a new Canadian producer.

“We believe the current environment will support higher cobalt prices for an extended period of time, encouraging the development of NICO and many years of commercial operations before balance is restored from a combination of new mines, conservation and recycling,” Goad said.

Meanwhile, Global Energy, which listed on the TSXV in March, recently announced the start of a work program at the Millennium cobalt project. “[I believe] it will prove out the potential of this already significant asset,” Smith said, explaining that there is also potential for additional projects to be added to the company’s portfolio.

First Cobalt’s Mell explained that his company was formed early in 2017 with the intention of offering investors access to the rapidly expanding cobalt market, which is being driven by forecasted growth in the EV and battery materials market. “Our focus early on was to get big fast to offer this exposure, while focusing our exploration program on the Cobalt Camp in Ontario,” Mell said.